Mar 20, 2013 01:26 PM IST | Source: CNBC-TV18

Nifty won't move beyond 5850 in March series: ICICI Direct

In an interview to CNBC-TV18, Amit Gupta, Head-Derivatives at ICICI Direct shared his views on the future and options market and various stocks.

In an interview to CNBC-TV18, Amit Gupta, Head-Derivatives at ICICI Direct shared his views on the future and options market and various stocks.

Below is a verbatim transcript of the interview:

Q: There was quite a bit of selling in the Option side from your market, what is it that the institutional investors are up to right now and how are you guys trading the index?

A: Last time we discussed in the month of February, how foreign institutional investors (FIIs) created the short positions in index Futures near 6,000 levels, which is why market was finding it hard to move beyond 5,950 levels.

Around 5,950 we have seen that about 5 percent of addition came in a single day in index Futures by the FIIs. If you look at the sell figure, it was the highest in a single day, around Rs 700 crore, throughout the series.  I will give a lot of weightage to that and it seems that in this particular series towards expiry, it is very hard for the market to move beyond 5,850 now.

In index Options we saw 5,800 Put and 5,700 Put, they were almost very close to each other since the starting of the series and were close to Rs 1 crore. Once 5,800 Put is taken out, we have already seen around 25 lakh shares being closed in 5,700 Put yesterday, which means it has become little bit more vulnerable and it is possible Nifty may breach these levels also.

On the downside, if we have to talk about any support, one can look at 5,630 because this was the high of March 2012 series and then we have seen that Rs 60-70 of premium was there at 5,700 Put Option whereas in the beginning of the series it got shorted. So, 5,630 may be an immediate support but yes, it is very hard for the market to sustain at higher levels at least in this series, we can see a bit more of stock specific pain.

Q: From the banks, anything in specific that you would go short on this morning?

A: Private banking is one space which is looking vulnerable because if you look at Bank Nifty particularly in the last two-three sessions, there has been 14-15 percent of closure of positions in Bank Nifty. I am not talking about yesterday's session where there was heavy short but before that we saw around 14-15 percent of closure, which started coming more from private banking where we saw that there was more closure of positions in Axis Bank or Yes Bank or HDFC Bank.

In yesterday's session, once 5,800 was taken out or in Bank Nifty it was 11,800 below which it started trading then we saw that the shorts were added in the private banking space. Axis Bank may be little bit more vulnerable, 100 day moving average (DMA) is around Rs 1,350 level, and so if it is not able to breach that, one can create shorts from there and keep a stop loss a bit higher from there.

Q: You are selling Cairn India today?

A: Cairn India is a good example of long liquidation. If you look at the last five-six months from June 2012, we saw people who were taking a lot of bets on a better risk-reward in the stock were going long around Rs 300 and were looking for the better target. Eventually it did not move beyond Rs 340 at all and finally now in the month of February we saw the breakdown below Rs 300. All of these long traders have stuck up in the stock and you will see more closure of open interest (OI) which can drag the stock further down. We saw some retracement towards Rs 310 but again it has come below Rs 300. So, I feel around Rs 290-292 one can create the short positions. Keep your stop loss at Rs 298 and look for a target of Rs 274.

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